Obama takes rosier view on economy

For the first time since taking office, President Obama is suggesting that some Americans may be overreacting to the nation's economic woes by dramatically ratcheting back their spending.

"What I don’t think people should do is suddenly stuff money in their mattresses and pull back completely from spending," Obama told The New York Times in an interview published on the Web Saturday. "I don’t think that people should be fearful about our future. I don’t think that people should suddenly mistrust all of our financial institutions because the overwhelming majority of them actually have managed things reasonably well."

Story Continued Below

In the same interview, conducted aboard Air Force One as he returned from a trip to Ohio on Friday, Obama flatly dismissed a question asking if he was a socialist, saying "the answer would be no." After the interview, he called back to say, " It was hard for me to believe that you were entirely serious about that socialist question."

During the interview, the president sounded another upbeat note about the economy by suggesting that a surprising number of banks will pass so-called stress tests the Treasury Department is conducting to see if they could weather a prolonged and deepening recession.

"I think that what you should see emerging there is an awful lot of banks that are in decent shape considering the circumstances," Obama said. "They’ve been managed well. They didn’t take undue risks. Obviously, they’re being hit like every business is being hit by the recession, but they can recover, and if they do need help, it’s going to be short-term help."

Obama said "a handful" of banks might not pass the tests. He vowed that the administration would move aggressively to fix that problem. "What we want to do is to cauterize the wound," he said.

Obama's comment about the stress tests was in line with what some banking executives have predicted in recent days. However, the president's statement was notable because he went further than his top aides have been willing to go. In an interview on Friday, one of his chief economic advisers, Christina Romer, declined to prejudge the outcome of the tests.

The positive comments from Obama are sure to be seen by some analysts as a bid to boost consumer spending, which accounts for about 60% of U.S. economic activity and has fallen sharply in recent months.

Obama startled reporters on Tuesday by seeming to encourage stock buying after his top aides had said for weeks that they were unconcerned over short-term drops in the markets.

"What you're now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it," he said during a press availability in the Oval Office.

Obama was more cautious than his aides in one regard—predicting when the economy will turn around.

Asked if he saw such a recovery beginning in the summer, the fall or by the end of the year, he declined to be pinned down.

"I don’t think that anybody has that kind of crystal ball. We are going through a wrenching process of de-leveraging in the financial sectors – not just here in the United States, but all around the world – that have profound consequences for Main Street," Obama told the Times. "It is going to take some time to work itself through."